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US Threatens to Starve Iraq of Its Oil Dollars Over Iranian Influence, Sources Say
A general view shows al-Firdous Square in Baghdad, Iraq, July 27, 2022. Photo: REUTERS/Ahmed Saad
Washington has threatened senior Iraqi politicians with sanctions targeting the Iraqi state – including potentially its critical oil revenues – should armed groups backed by Iran be included in the next government, four sources told Reuters.
The warning is the starkest example yet of US President Donald Trump’s campaign to curb Iran-linked groups’ influence in Iraq, which has long walked a tightrope between its two closest allies, Washington and Tehran.
The US warning was delivered repeatedly over the past two months by the US Charge d’Affaires in Baghdad, Joshua Harris, in conversations with Iraqi officials and influential Shi’ite leaders, according to three Iraqi officials and one source familiar with the matter who spoke to Reuters for this story. The message was delivered to some heads of Iran-linked groups via intermediaries, they said.
Harris and the embassy did not respond to requests for comment. The sources requested anonymity to discuss private discussions.
Since taking office a year ago, Trump has acted to weaken the Iranian government, including via its neighbor Iraq.
Iran views Iraq as vital for keeping its economy afloat amidst sanctions and long used Baghdad’s banking system to skirt the restrictions, US and Iraqi officials have said. Successive US administrations have sought to choke that dollar stream, placing sanctions on more than a dozen Iraqi banks in recent years in an effort to do so.
But Washington has never curtailed the flow of dollars from the oil revenues of Iraq, a top OPEC producer, sent via the Federal Reserve Bank of New York to the Central Bank of Iraq. The US has had de facto control over Iraq’s oil revenue since it invaded the country in 2003.
Iraqi Prime Minister Mohammed Shia al-Sudani’s office, the Central Bank of Iraq, and Iran‘s mission at the United Nations did not respond to requests for comment.
“The United States supports Iraqi sovereignty, and the sovereignty of every country in the region. That leaves absolutely no role for Iran-backed militias that pursue malign interests, cause sectarian division, and spread terrorism across the region,” a US State Department spokesperson told Reuters, in response to a request for comment.
The spokesperson did not answer Reuters questions about the sanction threats.
Trump, who bombed Iran‘s nuclear facilities in June, threatened to again intervene militarily in the country during protests last week.
NO ARMED GROUPS IN NEW GOVERNMENT
Among the senior politicians to whom Harris’ message was passed were Prime Minister Sudani, Shi’ite politicians Ammar Hakim and Hadi Al Ameri, and Kurdish leader Masrour Barzani, three of the sources said.
The conversations with Harris started after Iraq held elections in November in which Sudani’s political bloc won the single-largest bloc of seats but in which Iran-backed militias also made gains, the sources said.
The message centered on 58 members of parliament views by the US views as linked to Iran, all the sources said.
“The American line was basically that they would suspend engagement with the new government should any of those 58 MPs be represented in cabinet,” one of the Iraqi officials said. The formation of a new cabinet could still be months away due to wrangling to build a majority.
When asked to elaborate “they said it meant they wouldn’t deal with that government and would suspend dollar transfers,” the official said.
The US has had de facto control over oil revenue dollars from Iraq, a top OPEC producer, since it invaded the country in 2003.
Iran has long supported an array of armed factions in Iraq. In recent years, several have entered the political arena, standing for election and winning seats as they seek a slice of Iraq’s oil wealth.
Renad Mansour, director of the Iraq Initiative at London’s Chatham House think tank, said armed groups were increasingly benefiting from positions in Iraq’s massive bureaucracy and so took the threat of cutting dollar flows seriously.
“The US has significant leverage,” he said. “The threat of the loss of access to US dollars, which is how Iraq’s economy functions through the sale of oil, has made it very concerning.”
WASHINGTON OPPOSES FIRST DEPUTY SPEAKER
One of the people Washington objects to is Adnan Faihan, a member of the powerful, Iran-backed political and armed group Asaib Ahl al-Haq (AAH), who was elected first deputy speaker of parliament in late December, the Iraqi official and the source with knowledge of the matter said.
They said the US opposed Faihan’s appointment to the post.
In a sign the pressure campaign was working, AAH leader Qais al-Khazali communicated a willingness to the Americans to remove Faihan as deputy speaker, the Iraqi official said. Faihan currently remains in his position.
The AAH media office and Faihan did not immediately respond to a request for comment and neither did Faihan.
In the last government, AAH held the education ministry, and Iraqi officials say it is seeking to participate in the next government too.
AAH was a key group in a sophisticated oil smuggling network generating at least a $1 billion a year for Iran and its proxies in Iraq, sources previously told Reuters.
Khazali was sanctioned by Washington in 2019 for AAH’s alleged role in serious human rights abuses, related to the killing of protesters in Iraq that year and other violence, including a 2007 attack that killed five US soldiers. At the time, he dismissed the sanctions as unserious.
DOLLAR CONTROL
Iraq holds the bulk of proceeds from its oil export sales at a Central Bank of Iraq account at the Federal Reserve Bank of New York.
Though it is a sovereign account of the Iraqi state, the arrangement gives the US practical control over a critical choke point of Iraqi state revenues, making Baghdad reliant on Washington’s goodwill.
“US efforts to achieve stability in the region are focused on ensuring states retain their sovereignty and can achieve security through mutual economic prosperity,” the State Department spokesperson said in their reply to Reuters questions.
The move to pressure Baghdad with a possible suspension of dollars takes place as the US begins marketing Venezuelan oil, which followed the capture of Venezuelan leader Nicolas Maduro in Caracas by US forces and his transfer to New York to be put on trial in relation to drug charges.
The US Department of Energy has said all proceeds from Venezuelan oil sales would be initially settled in US-controlled accounts at globally recognized banks.
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Forverts podcast, episode 8: Subway stories
דער פֿאָרווערטס האָט שוין אַרויסגעלאָזט דעם אַכטן קאַפּיטל פֿונעם ייִדישן פּאָדקאַסט, Yiddish With Rukhl. דאָס מאָל איז די טעמע „די אונטערבאַן“.
אין דעם קאַפּיטל וועט איר הערן צוויי אַרטיקלען: משהלע אַלפֿאָנסאָס פּערזענלעכן עסיי „און אַלץ צוליב אַ יאַרמלקע!“ וואָס איר קענט אַליין לייענען דאָ, און אַ צווייטן אַרטיקל פֿון שׂרה־רחל שעכטער, „זכרונות פֿון אַן אונטערבאַן־פּאַסאַזשיר“, וואָס איר קענט לייענען דאָ.
צו הערן דעם פּאָדקאַסט, גיט אַ קוועטש דאָ.
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New York City Police Investigate Antisemitic Subway Assault
New York City Police Department (NYPD) vehicles are seen in Brooklyn, New York, United States. Photo: Kyle Mazza via Reuters Connect
The New York City Police Department (NYPD) is investigating an antisemitic incident in which an African American male assaulted a Jewish public transit commuter on the subway, according to local reports.
The victim, Jeremy Garrett, told an ABC affiliate that he was reading a psalm on Monday morning when the assailant struck him on the head, knocking off his kippah in the process. Garrett later received treatment at a local hospital, WABC-TV reported.
“I thought the window of the subway fell on me,” Garrett recalled. “We tussled a bit, I was trying to hold him on the train, and then the doors closed, and they opened the doors again, and he ran off … it’s horrible because it happened on Purim, you know, right before the holiday.”
Garret added, “I still want justice, but I do forgive the man … They keep coming for us. We still keep living, so we’re not going to stop.”
New York City has seen similar incidents in recent months. In January, a woman was punched in the face while riding the New York City subway for wearing a hat that said “F—k Antisemitism,” according to a local report.
“F—k Jews,” the suspect, described as a “Black man in his 40s,” allegedly said to her before striking the blow, the New York Daily News reported, citing local law enforcement.
The victim then “fled” the railcar at the 116th St. – Columbia University subway station in Morningside Heights, Manhattan, while the assailant remained on board, the News added. She was reportedly not seriously injured, as medics did not treat her following the incident’s being reported to law enforcement.
Just last month, a 17-year-old student who attended the Renaissance Charter School in the Jackson Heights section of the Queens borough called on his classmates to “rise up and kill the Jews.”
Antisemitic hate crimes in New York City have seen a dramatic rise in recent years. The latest NYPD hate crime statistics show a 182 percent increase in January 2026, Mayor Zohran Mamdani’s first month in office, compared to the same period last year.
Mamdani, a far-left democratic socialist who has made anti-Israel activism a cornerstone of his political career, has repeatedly accused Israel of “apartheid” and refused to recognize its right to exist as a Jewish state.
Such positions have raised alarm bells among not only New York’s Jewish community but also Israeli business owners and investors, who fear a hostile climate under Mamdani’s leadership.
Jews were targeted in the majority (54 percent) of all hate crimes perpetrated in New York City in 2024, according to other data issued by the NYPD.
A recent report released in December by the Mayor’s Office to Combat Antisemitism noted that figure rose to a staggering 62 percent in the first quarter of 2025, despite Jewish New Yorkers comprising a small minority of the city’s population.
As The Algemeiner has previously reported, antisemitism in New York City has eroded the quality of life of the city’s Orthodox Jewish community, which is the target in many antisemitic incidents.
In just eight days between the end of October and the beginning of November 2024, three Hasidim, including children, were brutally assaulted in the Crown Heights section of Brooklyn. In one instance, an Orthodox man was accosted by two assailants, one masked, who “chased and beat him” after he refused to surrender his cellphone in compliance with what appeared to have been an attempted robbery. In another incident, an African American male smacked a 13-year-old Jewish boy who was commuting to school on his bike in the heavily Jewish neighborhood. Less than a week earlier, an assailant slashed a visibly Jewish man in the face as he was walking in Brooklyn.
In 2025, New Yorkers have seen organized antisemitic harassment. In November, hundreds of people amassed outside a prominent New York City synagogue and clamored for violence against Jews.
“The Jewish community is filled with anxiety and trepidation. We know that it’s open season,” Rabbi Mark Schneier, president of the Foundation for Ethnic Understanding, said in a statement to NY1 in February. “We’ve encountered these kinds of threats for the last 2,500 years, but if anything, there’s never been a greater time to be alive as a Jew than today.”
Follow Dion J. Pierre @DionJPierre.
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Gavin Newsom just confirmed the demise of the Democratic party’s support for Israel
“Let no American imagine that Zionism is inconsistent with patriotism,” said Louis Brandeis, American Jewish leader and Supreme Court justice, in 1915. “To be good Americans, we must be better Jews, and to be better Jews, we must become Zionists.”
For much of the next century, most American Jews stacked their liberalism on top of their patriotism on top of their Zionism. They overwhelmingly voted for the Democratic Party, and overwhelmingly supported both Israel and the United States-Israel alliance.
In recent years, however, many have found it increasingly difficult to deny is that support for Israel is, at present, hard to square with liberalism. And a statement this week by California Gov. Gavin Newsom, the probable 2028 Democratic candidate for president, made clear exactly how profoundly that shift has changed the Democratic party.
Israel is discussed by some “appropriately as sort of an apartheid state,” Newsom said on a podcast, adding that the U.S. would likely have no choice but to reconsider its military aid to the Jewish state.
Given that Newsom is broadly a centrist, his words made a clear statement: Politicians understand that uncritical support for Israel is no longer compatible with the Democratic mainstream. Democratic voters are pushing politicians to, if not abandon Israel entirely, then at least condition their support for it. And the future of American Jews and the Democratic Party is now not only up to Democratic politicians who decide how much to give Israel and under what conditions.
It is also up to American Jews, who have to decide whether those politicians, in doing so, are moving away from their values, or bringing them back into alignment.
Shifting sympathies
A Gallup poll released last month found that Americans’ sympathies now lie more with Palestinians than with Israelis. Up until last year, the opposite had held true. For Democrats, whose sympathies already “flipped strongly” — per Gallup — to Palestinians in 2025, the difference is more stark: 65% said they sympathize more with Palestinians, while just 17% say they sympathize more with Israelis.
Those tempted to write the change off as the result of a party captured by a young far-left should consider that, last year, Pew found that 66% of Democrats over the age of 50 have an unfavorable view of Israel, up from just 43% in 2022. (For those ages 18 to 49, the number was 71%.) A full 73% of Democrats over 50 said they had “none at all” or “not too much” confidence in Israeli Prime Minister Benjamin Netanyahu.
I have no doubt that some will say that the change is because people don’t understand the complexity of the situation in the Middle East; because they have forgotten the lessons of history; or because the Democratic Party is comfortable embracing antisemitism.
These claims ignore a simpler explanation: That the voters who are registered with the one major U.S. political party that still claims to care about liberalism, democracy, and human rights watched as Israel, by its own admission, killed some 70,000 Palestinians in Gaza.
They saw Israel’s leaders make it next to impossible for civilians in the Strip to receive necessary food and humanitarian aid. They see settler violence rising in the West Bank, including against American citizens, amid increased talk of annexation. They hear Netanyhau continue to insist that there can be no Palestinian state, and understand that the alternative he foresees is not one state with equal rights, but either a future of endless wars, or an undemocratic state in which Palestinians live under Israeli control without the rights of citizens.
In that context, many voters see that unflinching support for Israel is no longer in line with the values that drew them to their party. And since they cannot change Israel, they are trying to change their party.
No more cognitive dissonance
Democratic voters, in insisting that their politicians not walk in lockstep with Israel, are insisting that the party break its cognitive dissonance around Israel. Which means that the future of American Jews in the Democratic Party depends not only on how sensitively Democratic politicians navigate criticizing and checking Israel without elevating antisemitism. It also depends on whether American Jews are willing to admit this dissonance to ourselves.
For some, this is not an open question. There are American Jews who have no relationship to Israel, or whose relationship is an overwhelmingly critical one. Per last year’s Jewish Federations of North America National Survey, a combined 32% of American Jews aged 18-34 identify as either anti-Zionist or non-Zionist.
(Only 7% of American Jews overall consider themselves to be anti-Zionist, and just 8% say non-Zionist,. But most don’t subscribe to the label “Zionist,” either, with just 37% describing themselves as such).
In 2021, one poll of American Jews found that a quarter deemed Israel an apartheid state, well before Newsom likened it to one.
There’s also the reality that the vast majority of American Jews do not name Israel as their top issue when they go to the voting booth, and that the Republican Party is undergoing its own schism over Israel.
Still, that same JFNA poll found that most American Jews — 71% — do say that they feel emotionally attached to Israel. And 60% say that Israel makes them proud to be Jewish, even as 69% say that they “sometimes find it hard to support the actions taken by Israel or its government.”
What this means: For many American Jewish Democrats, encouraging politicians to break with Israel — or accepting that break is already in process — is likely more emotionally challenging than it is for American Democrats generally.
What Newsom’s comments show is that this is an emotional problem American Jewish voters will need to face sooner rather than later. Democratic voters are forcing Democratic politicians to resolve a disconnect, and they want it resolved quickly. The year is no longer 1915. Democratic American Jews are going to need to decide what it means to be “good Americans and better Jews.” If it can no longer involve being both liberal and staunchly pro-Israel, we will need to decide which of those items we find most important.
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